The term "free-to-play" has become anathema to some gamers, and Nintendo doesn't seem to like it all that much either. In fact, Nintendo boss Satoru Iwata says he believes that this trend is actively hurting their hardware business.

Last week's Q&A between Iwata and Nintendo's investors was published in English today, and it's full of businessy nuggets about how the company plans to turn their fortunes around. The Q&A is dense, stuffed with promises of new strategies and hopes that the upcoming releases of Super Smash Bros. and Mario Kart 8 will help move Wii Us after Nintendo's rough 2013. Iwata also reiterates the company's strategies to develop more Wii U games that show off what the GamePad can do.

Last night was the night that Nintendo told investors—and the world—how they're going to meet…
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It's this quote that really stands out (bolded emphasis mine):

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However, it has been 30 years since Nintendo started its business of dedicated video game systems, and if I want to maintain that size for the next 10, 20 or 30 years, leading a software-only business would only put us at a big disadvantage, which is another reason why we insist on our integrated hardware-software model. On the other hand, the integrated hardware-software model has a significant handicap today, as the traditional way of explicitly telling consumers the investment they need to put in to buy hardware and software now comes across as being relatively more expensive due to changes in our environment.

Although people may actually be spending more money (to play games on other devices not dedicated to video games), it is less visible, so the hurdle we have to clear in order to encourage them to purchase dedicated game systems has comparatively become higher. As with games that are free-to-play, or "free-to-start" as we like to call it, there is a tendency within the entertainment industry to make gaming as easy as possible to start playing. Because our hardware and software are integrated, we first need consumers to purchase our hardware to get our business off the ground, a challenge I outlined when I talked about changing the way we sell our products. Our mid-term goal would be to give an answer to this question in a way that had never been seen before.

I do not think that hardware-software integration is equivalent to making people smile, and I do not intend to say that making games on smart devices will not lead to putting smiles on people's faces. There are games on smart devices that are indeed making consumers smile, I think.

However, only two years ago, many people urged Nintendo to follow other companies into what was then a very lucrative area, but no one says so any longer. In a similar vein, those who now claim that we should make games for smart devices might or might not be saying so in three years. It is our determination for our mid-term future to make efforts to devise our own solutions different from others.

In other words, Nintendo plans to keep doing what has traditionally worked for them—their own hardware coupled with great games. They're not interested in chasing trends, which is a philosophy that has led to some lucrative roads (the Wii) and some unacceptable mistakes (lack of online infrastructure). Perhaps Iwata and crew believe that the free-to-play craze is a trend that will plummet just like Facebook games did. And even if they're wrong, the logic makes sense.